Agenda item

This report provides information on the outcome of the actuarial valuation exercise at 31 March 2022. It also presents the conclusions made by the Fund’s actuary, Hymans Robertson, regarding the actuarial valuation results for the whole fund. This includes revised contribution rates for the next three years starting on 1 April 2023, as well as the funding position as of the valuation date. An updated version of the Funding Strategy Statement has also been included for approval, subject to the completion of the consultation with the Fund’s employers.

The Head of Pensions and Treasury introduced the report which provided information on the outcome of the actuarial valuation exercise at 31 March 2022, presented the conclusions made by the Fund Actuary, and reported an updated version of the Funding Strategy Statement (FSS) for approval, subject to the completion of the consultation with the Fund’s employers.

Overall, it was reported that employer contribution rates had been reduced largely due to investment outperformance and revisions to actuarial  assumptions since the 2019 valuation exercise. It was noted that the Pension Fund was required to consult employers on any changes to their contribution rates as well as the updated FSS. The majority of employers were content with the proposals and, following some updates to the FSS, further engagement was ongoing. The funding position had also improved since 2019 and it was noted that this was routinely monitored to ensure that the Pension Fund retained a healthy funding position.

Douglas Green, Hymans Robertson, explained that the valuation exercise measured the Pension Fund’s position as at 31 March 2022 and the FSS was a guide for engaging with employers over the next three years. It was explained that the purpose of the Pension Fund was to ensure that the pension benefits of its members were paid in full and on time to members when they retired. It was noted that, unlike most public sector pension schemes, the Local Government Pension Scheme (LGPS) had assets to which would be used to pay benefits. These assets generally came from two sources: investment returns and contributions paid into the scheme. It was noted that the Haringey Pension Fund had approximately 50 employers, with Haringey Council as the largest employer. It was explained that the position of each employer was monitored and, through the actuarial valuation, the funding plan for each employer was analysed and reset every 3 years in line with the LGPS Regulations.

It was noted that the process for the valuation was set out in paragraph 6.3 of the report. It was commented that the majority of tasks had been undertaken and that all work was expected to be completed by the end of March 2023. It was explained that some final information had been received recently from the government but that it was anticipated that there would be a fully compliant valuation within the regulatory timescales.

In relation to the Pension Fund funding level, it was reported that the position was significantly stronger than 2019 and the funding level was now 113%. This was primarily due to strong investment returns. However, it was too early in the process to determine how this compared to other funds but it was considered that this performance was likely to be at the higher end.

In relation to the contribution rate for each employer, it was noted that some details were awaited from employers. It was explained that these details would be confirmed and that the new contribution rates would apply from 1 April 2023. In relation to the Council rate, it was commented that some early stage modelling had been undertaken to discuss appropriate contribution rates which had been helpful for the Council’s main budget. It was clarified that the contribution rate for members was set by the LGPS Regulations and was not affected by the valuation exercise.

It was enquired why the primary rate of contribution was 17.5% and how this compared to other funds. Douglas Green explained that the LGPS Regulations stated that funds needed to be able to pay pension benefits to members and that the contribution was to be divided between primary costs, which was the cost of benefits for active members accrued in the next year, and secondary costs. It was noted that the primary rate of contribution was similar to other funds or possibly slightly less than other funds based on the strong performance of the fund.

Some members noted that the Council contribution rate was 17.5%; it was enquired how this compared to the last three years, whether the insourcing of Homes for Haringey into the Council impacted this figure, and whether Homes for Haringey staff were treated the same as Council staff. Douglas Green explained that the Council pool now included Homes for Haringey, as well as local authority schools, and that there was a single contribution rate. It was highlighted that member benefits were not influenced by the employer contribution rate. It was stated that 17.5% was the Council contribution rate before past service funding was taken into account. It was noted that the exact contribution rate was included in the exempt section of the report at page 205 of the agenda pack.

Julie Bailley, Hymans Robertson, provided an update in relation to the FSS. It was noted that the FSS was typically reviewed at the same time as the triennial valuation. It was explained that there had been a reasonably extensive review and that it was proposed to change the structure of the document so that it was easier for employers to use and understand. It was noted that the review had been undertaken working closely with officers and with an external copywriter to ensure that the language used was as clear as possible. It was stated that the revised FSS provided a clear statement of objectives and was compliant with the Chartered Institute of Public Finance and Accountancy (CIPFA) guidance. It was explained that there had been no significant changes to the FSS itself, other than technical changes to reflect the actuarial valuation, and that the proposed changes focused on presentation. It was added that further work was required to update specific policies within the FSS; this was a live document and future updates would be presented to the Pensions Committee and Board.

Some members asked about the estimation of the net cash flow position as a percentage of total fund assets. Julie Bailley noted that this related to future modelling and was not a figure that was readily available; it was explained that the valuation report was backwards looking. It was commented that the funding level was affected by performance and future expectations and that this only provided a snapshot of the circumstances; it was highlighted that it was key to focus on whether the FSS was appropriate and whether contributions were sufficient. It was added that the contributions for the past year were based on the 2019 valuation and that the new rates for contributions would apply from 1 April 2023. It was noted that the contributions expected from the past year had been built into the valuation and FSS predictions.

Following consideration of the exempt information, it was

RESOLVED

1.    To note the Haringey Pension Fund Report on the actuarial valuation at 31 March 2022 report, prepared by the Fund’s Actuary, Hymans Robertson, and appended as Appendix 1 to the report.

2.    To approve the draft Funding Strategy Statement (FSS), appended as Appendix 2 to the report, subject to the completion of the consultation with the Fund’s employers. If material changes to the FSS were required as a result of the consultation, a revised FSS would be brought to the Pensions Committee and Board for approval.

3.    To note the draft Rates & Adjustments Certificate provided by the Fund’s Actuary, Hymans Robertson, and appended as Confidential Appendix 3 to the report.